Which of the following is NOT a recognition criterion for a revenue contract?

The recognition criteria for a revenue contract are vital for determining whether and when revenue can be recognized under the revenue recognition standard, ASC 606. The criteria include having an approved contract, identifying the rights of the parties involved regarding the goods or services, and assessing the probability of collecting payment from the customer.

The fact that payment terms cannot be identified does not align with the criteria necessary for revenue recognition. For a contract to be valid, it is essential that the payment terms are ascertainable; without clear payment terms, the contract lacks the necessary structure required to recognize revenue. Clear payment terms set expectations for both the entity and the customer and are crucial for the enforceability of the contract.

In contrast, the approval of the contract, clarity regarding the rights linked to the goods, and the probability of collection all form integral parts of establishing a valid revenue contract. Each of these elements contributes to ensuring that the revenue recognition process aligns with the agreed-upon terms, thus promoting transparency and consistency in financial reporting.